Don’t bite off more than you can chew during your modernization journey

Don’t bite off more than you can chew during your modernization journey

Time Stamp: September 26, 2023 12:37 PM
Don’t bite off more than you can chew during your modernization journey PlatoBlockchain Data Intelligence. Vertical Search. Ai.

The days of the ‘big bang’ IT modernization are over. Here’s why banks need to embrace a progressive approach.

In the race to modernize core IT architecture to deliver more personalized and engaging experiences to their clients and members, traditional financial institutions are up against a formidable foe: legacy technology stacks.

After many years in operation, banks have amassed tens if not hundreds of different systems – some potentially dating back decades. Many companies dream of ripping and replacing it all, but a so-called “big bang” migration, where wide swaths of older programs are upgraded at once, can be both expensive and risky. And in an environment where every dollar is now being scrutinized by company leaders, IT chiefs are understandably hesitant to stake their reputations on a project of such a scale.

It becomes even harder for businesses in regulated industries like financial services, where any hiccup could lead to lost revenue, penalties or worse. It’s why, despite

ambitions to move to the cloud, many banks are still relying on non-cloud based mainframes for many of their most critical operations.

But while the price of acting might be high, the cost of doing nothing is even greater. As those old systems calcify, businesses have a harder time capitalizing on the power of new innovations like cloud computing, machine learning and the use of artificial intelligence. So while competitors are wooing customers away with data-driven experiences, the IT laggards are spending their time trying to jerry-rig software from the 1980s to interface and work with today’s tools.

The answer is a journey modernization. By pinpointing the most important areas for improvement based upon current and future client demands, financial institutions can tackle the most vital parts of the IT upgrade efforts first, in a thoughtful and calculated manner.

With such an approach, companies can reinvent their most important customer touchpoints in a responsible and cost-effective manner. In fact, those institutions that use a progressive approach for their IT modernization efforts achieve

results up to 50% faster compared to the “big bang” migrations.

Give the customers everything they want

Banks need to invest in building IT platforms that can span the breadth of a customer’s needs.

For example, prospective clients seeking a new home loan are more likely to pick a financial partner that can provide online mortgage lending along with access to real estate expertise and ongoing support services. Or, for those customers focused on expanding their existing wealth, they’ll look for banks that are using their own data to generate personalized financial guidance.

Knowing where to invest requires financial institutions to be deeply connected to their customer base to understand what features they want right now and where demand is heading in the future.

Journey modernization makes that easier. With iterative upgrades, companies can deploy new tech tools much faster. Then, they can track client feedback and, if necessary, pivot quickly to address any problems or pushback. 

To start, banks should truly understand how customers are using all their existing services, then start mapping typical user journeys to identify existing pain points or areas of opportunity. Afterwards, IT chiefs should examine every item listed in each category to figure out the supporting technology. That will help the bank start to narrow down where to begin modernization efforts.

Go micro (and open)

In legacy software programs, if one part needs an update, the whole system often needs to be refreshed. It’s a massive headache. Most companies simply avoid updating for as long as they can, which is one of the reasons why they continue to run such outdated technology.

Today, most applications are modular, built up of different, interconnected parts. With a microservices architecture, updating one area doesn’t affect all the other segments, so introducing products and deploying new tools becomes much easier. And by deploying a new tool today, it doesn’t mean you’ll be stuck with it for many years to come.

That doesn’t mean institutions can be cavalier when choosing the software to add. They need to be carefully selective and identify a small number of anchor platforms that can easily connect into both their legacy and next-gen applications. That enables businesses to build the modular IT platforms they need to be agile and compete more effectively in the future.

Know what makes you special

Financial institutions also need to be acutely aware of why clients are choosing them in the first place. After identifying their strongest points of differentiation, companies can then invest more heavily in software that helps improve those features or services.

And it doesn’t all have to be bought externally. Companies should focus in-house development efforts on new features for their most critical products or services. Then, they can outsource management of the rest of the IT stack. That way, businesses can devote the bulk of their direct time and energy to where it matters most. 

Banks are
under enormous pressure right now to simultaneously cut costs and invest in new technology that can help them delight customers with end-to-end, personalized experiences. A journey modernization around a small number of anchor platforms is the only answer. It creates long-term cost efficiencies, while still enabling financial institutions to capitalize on the latest and greatest IT innovations – both today and in the future.

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